The law legalizing sports betting in Massachusetts has regulators in a bind.
Provisions in the law, which was passed by the state legislature this summer, allow for temporary licenses that could let operators take wagers for a year. However, the books could then be forced to shut down after that year if they don’t obtain a permanent permit, causing confusion and turmoil among players.
That quandary was aired on Thursday during a meeting of the Massachusetts Gaming Commission, the state’s regulator of retail and online sports betting, as the head of the watchdog warned of “complexities” that can arise when implementing legislation.
“The commonwealth should be extremely proud of the level of interest in sports wagering mobile and digital operators have signaled,” said Cathy Judd-Stein, chair of the gaming commission. “However, today you will learn that an outcome of implementing the temporary licensing process under the statute could require dismantling the process of ongoing betting operations that could create significant destabilization to this new industry that all wish to see launched with excellence and integrity, and in a timely manner.”
A problem, no cap
The issue before regulators is the law outlining legal sports betting in the state caps the number of online licenses at 15 but has no cap on temporary licenses, which would cost operators $1 million to obtain and allow them to take bets for a year. There is also a relatively low bar to qualify for a temporary permit and an apparent statutory requirement for regulators to award such a license if the criteria are met.
Nevertheless, if a temporary licensee does not receive a permanent permit for online sports betting, it would have to shut down after that year. And, given more than 30 operators have signaled their interest in online sports betting in the state, there could be considerable takeup of the temporary licenses and competition for permanent permits that exceed availability.
In other words, the Massachusetts sports betting law as currently written could result in a sportsbook operator obtaining a temporary permit, taking bets for a year, and then being forced to close its digital doors. That could end up angering a lot of bettors and bookmakers, especially after the state’s gaming commission awards the seven permanent online sports betting licenses that will not be connected to a casino or racetrack.
“For those companies that do enter the temporary license pool as a mobile operator and do not advance to getting a full license, as many of 76% of those are going to be required to shut down their operations in Massachusetts once the commission makes that final determination of the up to seven untethered licenses,” said Karen Wells, the commission’s executive director.
“We have obvious concerns about consumer protections during the course of this broad shutdown,” Wells added. “Aside from the inevitable confusion in the marketplace that will occur when these platforms cease their operations, we expect there's going to be a multitude of questions that must be addressed.”
One of the lingering questions is what would happen to the money a bettor has with a book that's forced to shut down, the director noted.
Timing is everything
The regulator’s legislative issues have cast a pall over the launch of sports betting in Massachusetts, which has been a long time coming but still has no official start date. Sorting out the temporary-licensing matter could cause further delay and irritate bettors, particularly with the National Football League’s regular season underway.
“Part of the reason we can’t give those dates, quite frankly, is the topic that’s taken up the bulk of our time this morning,” Commissioner Eileen O’Brien said during Thursday’s meeting.
The plan now for the Massachusetts Gaming Commission is to await additional legal advice and to host a roundtable with mobile sportsbook operators next week to get their feedback. Regulators are also hard at work on both the temporary and permanent licensing process.
“We're going full force working on a parallel track,” Wells said. “So that means that any temporary license may only be valid for a short period of time, even well under a year.”